With close to Rs 1 lakh crore debt to public sector banks, India’s flagship manufacturers of auto grade steel — Bhushan Steel along with its branch Bhushan Power & Steel, has emerged as one of the largest corporate defaulters.
In a meeting with the heads of PSU banks on Friday, Finance Minister Arun Jaitley told them to go whole hog after the “big fish” taking recourse of the government machinery such as Bankruptcy and Sarfaesi laws.
“Among the large corporate debt defaulters, the names of Bhushan Steel appeared at least twice in the meeting along with beleaguered promoter of now defunct Kingfisher Airlines,” sources present in the meeting told DH.
They said, a consortium of 27 public sector lenders have believed to have lent close to Rs 99,000 crore to two brothers — Bhushan Steel and Bhushan Power & Steel.
The lenders are now vigorously planning to restructure and turn around the firms. The total outstanding with Bhushan Steel, owned by Neeraj Singal, is believed to be close to Rs 54,000 crore, and that with Bhushan Power and Steel, an unlisted company, which is owned by Sanjay Singal, may total up to Rs 45,000 crore. The credit has been disbursed to the firms before the group was split into two in 2002.
The listed entity among them, Bhushan Steel has three plants in Odisha, Maharashtra and Uttar Pradesh. The company is running into losses and had reported a net loss of 656.21 crore in the June quarter of financial year 2016-17.
According to last year’s annual report of Bhushan Steel, the company was facing severe stress in its debt servicing for past few years due to several reasons. After Friday’s meeting, Jaitley reiterated that the steel sector continued to be under stress along with the infrastructure but “proactive” steps are being taken to rid the sectors of their pressure.
The problem with the steel sector in general is that there has been a sharp surge in steel imports in India in the past few years leading to a substantial fall in domestic steel prices.
This has impacted the profit margins of steel makers and affected their cash flows. Sources said that the finance minister asked bankers to be aggressive in loan recovery from the small borrowers as well but warned them against being coercive.
Lenders are now vigorously planning to restructure and turn around the firms
The total outstanding with Bhushan Steel is believed to be close to Rs 54,000 crore
Bhushan Steel has three plants in Odisha, Maharashtra and Uttar Pradesh
FM asked bankers to be aggressive in loan recovery